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Anchor Group lists at 50% premium

Opening price values company at R277.8m.

JOHANNESBURG – The Anchor Group listed on the JSE’s alternative exchange, the AltX, on Tuesday morning at R3 a share, a premium of 50% to its pre-listing issue price of R2 a share.

This values the company at R277.8 million.

The share closed at R3.50, after reaching an intra-day high of R3.94.

The Anchor Group’s main business is mid-size asset manager Anchor Capital, which has roughly R5.2 billion in assets under management. It also has a majority stake in Ripple Effect 4, an information technology and financial services training business that offers services to Anchor Capital and a couple of minority interests in other asset ventures.

Anthony Clark, small and mid-cap analyst at Vunani Securities, says the opening price of R3 a share indicates the significant interest in the initial public offering (IPO) given that there was not much stock available and the inherent growth prospects in the business from rising assets under management.

The fairly established cost base also means the earnings potential for Anchor Capital as set out in the pre-listing statement remains far too conservative, he says.

“At R3 the stock in my mind continues to offer value on a 12- to 24-month view,” Clark says.

But liquidity will likely be limited.

Clark says there was an unprecedented demand for the stock at the IPO.

“It is not everyday you get a chance to buy into a fast-growing asset management company on a very cheap PE and paying a big fat dividend from day one,” Clark says.

The listing has been an unqualified success and the listing platform will further enable Anchor Capital to grow, Clark says.

According to a prospectus issued earlier this month, the key motivation behind the listing is the retention, attraction and incentivisation of staff members. The group also aims to enhance its profile as a growing asset manager.

In its early-morning note to clients, Peter Armitage (pictured), chief executive officer of the group, said they had no idea where the share price would trade “and for now it does not really matter to us and you will not see any selling from 25 Culross Road” [Anchor’s office].

“Staff appetite for our shares has been high. We are at the beginning of our innings and have our sights set on five to ten years hence.

Armitage said they set out to raise R60 million on listing and this was achieved faster than they ever anticipated.

“Demand has been strong and we have been forced to put out another Sens statement discouraging further applications. There are simply no more shares to allocate. We have been honoured by the demand for our shares and would love to have accommodated more new shareholders, but ultimately we are a small business and it did not make much financial sense to raise more cash,” Armitage wrote.

While the bulk of the capital raised will be set aside for acquisitions, some of it will also be used to cover listing costs, as additional working capital for Anchor Capital, to purchase property and for the development and expansion of Ripple Effect 4.

The company will have 92.6 million shares in issue. The earnings per share forecast for December 2014 is 21.7c and 27.7c for next year. This equates to a 12-month rolling forward PE of 7.6 times. The forward dividend yield is close to 7%.

Anchor believes it has the potential to double its assets under management in 2014 based on the targets achieved in the year-to-date, current growth rates and the pipeline of opportunities, “as long as equity markets are reasonably positive”, the prospectus states.

Armitage said the listing would expose the business to increased governance levels, increased exposure, accountability to a broader base, transparency and significantly more opportunity.

“All of these can be great positives, but in the new era of social media it also exposes one to many more observers and many anonymous commentators. We embrace this and will take the good with the bad, and are happy to be measured by public opinion,” he wrote.

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